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Government & Politics

From 23 to 3: Obamacare Co-Ops Down to Final Trio

More than half of all counties in the 39 states that rely on the federal HealthCare.gov exchange for ACA health insurance are experiencing a 10 percent price decrease, on average, for their cheapest plan for 2019.

New Mexico Health Connections’ decision to close at year’s end will leave just three of the 23 nonprofit health insurance co ops that sprung from the Affordable Care Act (ACA).

One, the Mountain Health Co Op, serves customers in Montana and Idaho and will move into Wyoming next year. Another co op operates in Maine and the third in Wisconsin. All made money in 2019 after having survived several rocky years, according to data filed with the National Association of Insurance Commissioners.

They are also all in line to receive tens of millions of dollars from the federal government under an April Supreme Court ruling that said the government inappropriately withheld billions from insurers meant to help cushion losses from 2014 through 2016, the first three years of the ACA marketplaces. While those payments were intended to help any insurers losing money, it was vitally important to the co ops because they had the least financial backing.

Mountain Health, which has about 32,000 members this year, is expecting $57 million from the Supreme Court victory.

“We are in excellent shape,” said CEO Richard Miltenberger. The plan made a $15 million profit in 2019, added vision benefits this year and is offering a dental exam benefit for next year. It’s also providing most insulin and medications for asthma and chronic obstructive pulmonary disease to members without any copayment to help ensure compliance.

The co op has two competitors in Montana and four in Idaho. When it begins operations in Wyoming next year, it will end the Blue Cross plan monopoly in that state’s Obamacare marketplace, Miltenberger said.

A big factor behind Mountain Health’s survival was that the plan received a $15 million loan in 2016 from St. Luke’s Health System, Idaho’s largest hospital provider, said CEO Richard Miltenberger. Although he wasn’t working for the co op at that time, Miltenberger said, it was his understanding that the hospital wanted to help keep competition in that marketplace. The co op had recorded nearly $60 million in losses in 2015 and 2015, but it has been in the black since and paid back the loan as its income improved. Lauded as a way to boost competition among insurers and hold down prices on the Obamacare exchanges, the co ops had more than 1 million people enrolled in 26 states at their peak in 2015. Today, they cover about 128,000 people, just one percent of the 11 million Obamacare enrollees who get coverage through the exchanges.

The nonprofit organizations were a last-minute addition to the 2010 health law to satisfy Democratic lawmakers who had failed to secure a public option health plan — one set up and run by the government — on the marketplaces. Congress provided $2 billion in startup loans. But nearly all the co-ops struggled to compete with established carriers, which already had more money and recognized brands.

State insurance officials and health experts are hopeful the last three co ops will survive.

“These are the three little miracles,” said Sabrina Corlette, a research professor and co director of the Center on Health Insurance Reforms at Georgetown University, in Washington, D.C.

Maine Aided in Supreme Court Victory

The Maine co op, Community Health Options, helped bring competition to the state’s market, said Eric Cioppa, who heads the state’s bureau of insurance.

“The plan has added a level of stability and has been a positive for Maine,” he said.

The co op has about 28,000 members, down from about 75,000 in 2015 and is building up its financial reserves, Cioppa said. Community Health Options is one of three insurers in the Obamacare marketplace in Maine, the minimum number experts say is needed to ensure vibrant competition.

Kevin Lewis, CEO of the plan, attributed its survival to several factors, including an initial profit in 2014, the year the ACA marketplaces opened, that put the plan on a secure footing before several years of losses. He also credited bringing most functions of the health plan in house rather than contracting out, diversifying to sell plans to small and large employers, and securing lower rates from two health systems during a couple of difficult years.

The co op, which made a $25 million profit each of the past two years, has proposed dropping its average premiums by about 14 percent in 2021, Lewis said.

Community Health was one of the lead plaintiffs in the case before the Supreme Court and expects to get $59 million in back payments from the settlement.

The federal decision to suspend those so called risk corridor payments, designed to help health plans recover some of their losses, was one of the factors that caused many of the co ops to fail, Corlette said. Republican critics of the ACA, however, blame poor management by the plans and lack of oversight by the Obama administration.

Insurers are in talks with the Trump administration about whether the $13 billion due the carriers must be added to their 2020 balance sheet or could be counted toward operations from prior years. This year, insurers are generally banking large profits since many people have delayed non urgent care because of the COVID-19 pandemic. Since the ACA limits insurers’ profit margins, adding that federal windfall to this year’s ledger might mean many insurers would have to pay out most of the money to their consumers. If the money is applied to earlier years, the insurers could likely keep more of it to add to their reserves.

The Supreme Court ruling came too late for New Mexico Health Connections, which lost nearly $60 million from 2015 to 2017. The co op would have received $43 million in overdue payments, but, in an effort to raise needed cash, it sold that debt to another insurer in 2017 for a much smaller amount.

Marlene Baca, CEO of the co op, which made a $439,000 profit in 2019, said with only 14,000 members, it made no sense to continue operating due to high fixed administrative costs.

Wisconsin’s Mystery Donor

Wisconsin’s Common Ground Healthcare Cooperative was on the verge of ending operations in 2016 when it received a lifesaving $30 million loan, said CEO Cathy Mahaffey. The insurer has refused to identify the benefactor other than to say it was not a person or company doing business with the plan.

In 2018, Common Ground was the only health plan in seven northeastern Wisconsin counties, she said. Today, the co op has about 54,000 members and faces competition from two to five carriers in the 20 counties where it operates.

Common Ground, which recorded a $73 million profit last year, expects to receive about $95 million from the Supreme Court case victory.

“We are very strong financially,” she said.

KHN (Kaiser Health News) is a nonprofit news service covering health issues. It is an editorially independent program of KFF (Kaiser Family Foundation) that is not affiliated with Kaiser Permanente.